2012 will be an exciting year for tablet fans as Apple brings out a new iPad and competition heats up. 2012 will also be the year when tablet players find it difficult – if not impossible – to compete with two major market approaches: One is that of Apple, leveraging content ecosystem to drive sales of hardware, and the other strategy by Amazon is based on gradually recouping losses on hardware with content sales.

Samsung Electronics, LG Display and Sharp reportedly shipped a total of one million units of high-resolution flat panels for next-generation iPads to Apple in October and will ramp up shipments to two million units in November.

TPK Holding and Wintek are set to ship up to a million touch modules per month beginning mid-November, the publication reports. This story is a follow-up to DigiTimes’ Wednesday report claiming Samsung and Sharp have begun shipping iPad 3 displays. Note that Apple might have begun winding down iPad 2 manufacturing.

The Korea Times also reported that LG Display is in talks with Apple involving 7.35-inch displays for a smaller iPad and today’s DigiTimes report confirms this by saying Apple is “reportedly developing a new panel in 7.85-inch size”. Sources are claiming that AU Optronics and LG Display have already delivered samples of this display to Apple for verification.

Tablets aren’t just a fad, mind you. That being said, the space is apparently so hot and getting so crowded than some branded vendors are believed to be giving up on tablets. If DigiTimes is to be trusted, Hewlett-Packard, Dell, Acer and Asustek will “gradually phase out” of the tablet market in 2012.

Digitimes also claims these vendors have found it impossible to compete with the likes of Apple, Amazon and Barnes & Noble because they are unwilling to lose money on hardware and lack an end-to-end ecosystem to monetize users with content sales.

With Amazon offering its Kindle Fire at US$199 and Barnes & Noble to provide its upcoming Nook Simple Touch at a price of US$99, the pure hardware players are unlikely to profit from the market through price competition.

If true, the great tablet bloodbath of 2012 will be about Apple, Amazon and Barnes & Noble.

Since Amazon and Barnes & Noble are mainly profiting from their content platforms, not the hardware, the sources believe these hardware devices will eventually be offered for free.

Amazon’s $199 Kindle Fire and Barnes & Noble’s upcoming $99 Nook Simple Touch are both estimated to cost more to produce than is their retail price. According to a teardown analysis and AllThinsD, parts for the Fire costs an estimated $201.70. Even though Amazon opted for cheaper components (and it shows), they now have a $199 tablet with a powerful ecosystem. Note that these estimates exclude other costs such as manufacturing, distribution, marketing, cost of sales, research and development, licensing and more.